Policy Rate Decision

The Monetary Policy Committee of the State Bank of Pakistan decided unanimously on July 27, 2026, to hold the benchmark interest rate unchanged at 11.5 percent. Central bank officials cited a strengthening domestic macroeconomic picture alongside ongoing exposure to external financial risks as the primary factors behind keeping the policy rate at its present level.

Domestic Economic Indicators

Recent price statistics show a steady deceleration in national inflation. Year-on-year headline inflation slowed to 11.1 percent in June 2026, moving down from 11.7 percent recorded during May. Over the same period, core inflation eased to 8.4 percent. On the external account front, the current account deficit for fiscal year 2026 remained contained within a narrow band of 0 to 1 percent of gross domestic product.

Foreign Exchange Reserves and Sovereign Rating

The central bank's foreign exchange holdings outperformed expectations, exceeding the end-June 2026 target of $18 billion. Holdings are anticipated to expand further, reaching $20.2 billion by December 2026. In light of these improving financial conditions, credit rating agency S&P raised Pakistan's sovereign credit rating to 'B'.

Outlook and External Risks

While key domestic metrics continue to improve, monetary authorities identified specific external factors that could impact future price stability. Key considerations for the inflation outlook include geopolitical developments across the Middle East as well as price fluctuations in global commodity markets.

Impacted Groups and Recommended Actions

The decision directly influences commercial banks, financial entities, business borrowers, retail investors, and general consumers whose credit agreements, savings returns, and money market yields align with the central bank's benchmark rate. Market participants and enterprises are encouraged to preserve their existing financial plans, re-assess variable-rate loan obligations, and track upcoming monthly inflation metrics and international energy price trends before the next policy review.